How Argentina’s Presidential Election Could Help Its Real Estate Market

Candidates call for easing currency restrictions that have stalled sales

Argentina’s upcoming presidential election is stirring hopes that the next administration could end currency restrictions that are partly blamed for the woeful state of the country’s real estate market.

Eric Ritondale, senior economist at Econviews consultancy in Buenos Aires, said changes in currency rules are expected. “We are moving into that direction, and it should favor the real estate market, which is currently stalled mainly due to the foreign exchange gap,” he said.

Several leading presidential hopefuls have stated that, if elected, they would end the restrictions. The main opposition candidate has said he would end the controls a day after taking office.

Ritondale suggested that the gap between the official and informal exchange rates for U.S. dollars makes it difficult for buyers and sellers to agree on prices.

The status quo, however, would continue to give foreign buyers the upper hand since they have easier access to dollars.

In fact, for foreign buyers, the economic turmoil makes “Argentina the place to start looking at,” said Domingo Speranza, founder and president of real estate services firm Newmark Grubb Brace in Buenos Aires.

Luxury home prices in Buenos Aires dropped 15% in 2014 compared with the year before, according to Knight Frank’s Prime International Residential Index, which tracks cities and second home locations. Prime prices fell 3.9% in Latin America overall.

The real-estate market in Argentina has been suffering from the effects of domestic as well as global troubles, including reduced demand from Europeans caused by the euro crisis.

Making matters worse, locals’ ability to buy homes has been hampered by annual inflation that borders 35%, virtually no mortgage loans and tight government currency controls in place since late 2011.

In order to exchange pesos for dollars, a government agency must review how the dollars will be used. Dollars are the dominant currency for real estate transactions in Argentina.

President Cristina Kirchner, in power since 2007, is not allowed to run for re-election after serving two consecutive terms. Two candidates lead the polls: Daniel Scioli, the current governor of the province of Buenos Aires, and Buenos Aires Mayor Mauricio Macri from the opposition.

Adriana Massa, sales manager for Argentina Properties Sotheby’s International Realty in Buenos Aires, says buyers can find attractive apartments in French-style buildings in high-end barrios like Recoleta for about $260 or $280 per square foot. For $1 million, buyers can purchase about 3,585 square feet of luxury property in the most exclusive areas of Buenos Aires. In comparison, $1 million buys only 366 square feet of prime real estate in New York, according to Knight Frank’s 2015 Wealth Report.

Guillermo Troglia, head of foreign investment for ReMind Group, an affiliate of Christie’s International Real Estate in Buenos Aires, said he is seeing more inquiries from foreigners, especially Chinese and Russians. His office has closed two deals for foreigner buyers this year, one in the countryside and another one in the capital, for more than $5 million each. He declined to reveal the identity of the buyers or the sizes of the deals for privacy reasons.

“We’ve gone through many crisis, but Argentina is an incredible country, and, in the long run real estate prices will go up not down,” said Troglia.

How to buy:

- Foreigners face no restrictions on acquiring residential properties, and in many cases don’t even have to bring cash into the country. Sellers commonly accept or even request to have payments deposited into an offshore bank account. This means foreigners don’t have to exchange dollars for pesos, which in turn increases their purchasing power, said Speranza.

- Local taxes, of around 8% of the property selling price, and brokers’ commissions, of about 4%, are paid in pesos.

Where to look:

Among the most sought-after neighborhoods in Argentina for foreigners are San Isidro in Buenos Aires and the artsy district of Puerto Madero. Listed by Sotheby’s International Realty, a French-style house with four bedrooms and lake views is selling for $2.8 million in San Isidro. For those who prefer the country life, La Favorita, a farm with a Spanish colonial-style main house with 11 bedrooms, is listed for $10 million.